StarNet Severs DSL Connection With Covad

StarNet's Internet service provider customers around the U.S. got a disturbing email in their inbox this week, giving them until Dec. 31 to find another high-speed provider.

StarNet, a provider of dial up, ISDN and digital subscriber line access to ISPs, claims substandard customer support and service from its supplier, Covad Communications Group, as one of the reasons for giving up on DSL.

In a letter obtained by internetnews.com, Russ Intravartolo, StarNet chief executive officer, wrote that while a customer's service should remain intact until the end of the moth, there is no guarantee will.

"While your existing StarNet DSL circuits remain active at this time, StarNet cannot guarantee DSL service for any fixed period of time. Accordingly, StarNet recommends that you take the necessary steps to transfer your StarNet DSL services to another Covad DSL wholesaler so that your customers experience seamless migration of services through your new provider."

Intravartolo said the news comes as no surprise to his customers, who've known the end was coming since October.

"Our customers have known as far back as July that we weren't taking any new orders for DSL from Covad," Intravartolo said. "Since then, we've just been providing DSL to the customers with existing orders. In October, we stopped taking new orders altogether. That gave them plenty of time to find a new reseller, we just needed to put a date on the end of the service."

StarNet's chief pointed to DSL pricing industry-wide, where telcos like SBC Communications can charge flat-bottom pricing, while StarNet, a reseller of a reseller, is forced to keep prices competitive and still make a profit.

The only reason why ISPs would go to StarNet is for superior service, something he claims Covad couldn't deliver. Thus, Intravartolo said, customers never paid their ISP for poort DSL service, leading to ISPs which couldn't pay StarNet. Starnet, on the other hand, was still expected to foot the bill to Covad.

"Ending our relationship with Covad is not easy for us," Intravartolo said. "We were one of Covad's first customers and have been with them for a couple of years. But the fact of the matter is we were losing 50 cents on every dollar we gave them. We stayed with them in the hopes they would turn it around, but it didn't happen. We were looking for a better future that never came."

On Jan. 1, 2001, customers will be summarily disconnected, the disconnection email said, but StarNet support staff will be available to make the transition as smooth as possible. All ISPs are being referred to other Covad DSL resellers.

Intravartolo expects the impact on Covad's operation to be minimal, as most ISPs are going to other Covad resellers. As it was, DSL accounted for less than seven percent of StarNet's overall business, he said, with only 251 of the 930 ISPs in using the high-speed service.

StarNet officials said the company would continue to offer dial up and ISDN access, as well as its package of outsourced services for ISPs.

Covad is the fourth largest DSL provider in the U.S., with about 205,000 subscribers. The company has come under fire lately, with disappointing third quarter results that have driven investors elsewhere.

It's an attitude reflected across the industry, with Wall Street hammering the stock values of the three largest independent DSL providers in the U.S.; Covad , Rhythms NetCommunications and NorthPoint Communications . All three have stock values below $3 a share, after enjoying highs between $30-$50 a share earlier this year.

The three CLECs claim they are caught between the wholesalers and ISPs who don't pay for their service, and the telcos who own the network. The wholesalers claim they aren't getting paid by their customers because of poor service and a difficult installation process, while the tel

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